LSME504 - International Business: Global Economy & Trade Development

This essay examines the interconnected framework of economic activities between countries, focusing on how factors like physical capital, natural resources, human resources, legislative policies, and technological advancements shape the global economy and influence international trade. It uses examples such as multinational investments in developing regions, the 1973 oil crisis, the impact of human resource restrictions during the pandemic, and Brexit to illustrate these points. The essay further analyzes the global business environment, highlighting how political stability, economic growth, social trends, technological changes, climate change, and legislative elements impact international trade and business development, particularly for multinational and small businesses seeking international expansion. The document is available on Desklib, a platform offering study tools for students.

International
Business
1

Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
CONCLUSION................................................................................................................................4
REFRENCES...................................................................................................................................5
2

INTRODUCTION
Globalization has accelerated international trade and opened opportunities for
international expansion to small business firms operating in any part of the world (Ahmedov,
2020). International trade is considered important for economic growth and many governments
have formed international trade blocs to promote free trade in their regions. The different factors
which affect global economy are explained in this essay and their influence on international trade
is described. In addition to this, the global business environment is analysed in this essay and its
influence on the development of international trade is evaluated.
MAIN BODY
The global economy includes the interconnected framework of economic activities which
I conducted between different countries and international territories. It includes international
trade and facilitate economic growth of regions and countries on an international scale. The main
characteristics of a global economy are globalization international trade international finance and
global investment. Globalization has facilitated free flow of information ideas, international trade
supports economic relations between countries and international finance along with global
investment is required for completing business activities on an international scale. It is important
for businesses to understand the changes and fluctuations in global economy because it plays a
crucial role in growth of corporates. The primary factors which impact and shape the global
economy are physical capital, natural resources, human resources, law and technology.
Physical capital is one of the basic requirements for production which increases then
portents of physical capital in global economy. Physical capital is defined as the equipment and
structures utilized food production of goods and services. The human made materials and input
utilized in the procedure of reduction which supports the production process the first to the
physical capital. Cash inventory equipment machinery real estate awesome examples of physical
capital (Ahn, 2020).
The necessity first physical capital manufacturing any kind of good makes it an essential
element of the global economy and it has a high influence on major players in the global
economy. If a country has advanced physical capital and businesses can easily gain access to
quality machinery, cash investment equipment and other material needed for protection then the
specific country is considered more global for global business and trade. In this way physical
3

capital influences global trade and shapes the major players in the global economy (Akman,
Karaman and Kuzey, 2020).
An example of physical trade capital influencing international business can be seen by
the investment of multinational organizations in manufacturing plants located in developing
regions such as Bangladesh and China. The foreign investment made by multinational
organizations in opening or outsourcing their manufacturing activities two developing economies
is to gain access to cheaper infrastructure so that they are able to reduce their operational costs
and increased profits in developing economies where they have their primary consumer base.
This showcases the influence of physical capital and availability of cheaper physical capitals
dictating the flow of global investment and international trade.
Natural resources in relation to global economy refer to any source of wealth that occurs
naturally specifically minerals fossil fuels timber. Natural resources include both renewable
natural resources which can be replenished easily such as sunlight and non-renewable resources
which have higher consumption rate in comparison to recovery rate such as fossil fuels. Natural
resources are used in production of many products and services and some natural resources are
essential for daily survival of humans such as water (Akoto, 2021). The abundance or lack of
natural resources in a country change sleep position in global economy and influences the
landscape of global economy.
International business and trade is also affected by the availability of natural resources
such as fossil fuel and valuable minerals like gold. In this way natural resources are double
edged sword for global economy as the level of the usage of natural resources raises its output
but also increases the depletion rate. The major players in international economy have control
over important natural resources such as fossil fuels, gold or other rare mineral because the
demand of natural resources is high on a global scale and helped the country maintain beneficial
position on the global economic landscape. The usage and sale of natural resources on
international scale affects economic indicators such as foreign exchange rates (Andelekke and
Gichuru, 2021).
One of the primary examples of natural resources affecting global economic environment
is the first oil crisis of 1973. In the year 1973, organization of Arab petroleum exporting
countries implemented an embargo on the natural resource of oil which created a oil crisis
resulting in rise in oil prices and a decrease supply of oil to develop economies. As oil voice and
4

continues to be the main source of energy for advanced industrial economies, the oil crisis off
1973 lead to instability of the global economy. The price of oil offered by other nations increased
which affected international trade and business. This showcases is that essential natural resources
such as oil play an important role in international trade and stability of the global business
environment.
Human resources refer to the knowledge expertise and labour provided by human
employees to business firms which supports daily functioning of the company (Blonigen and
Wilson, 2018). Human resources and not only an important element of businesses in the current
corporate environment but also an important factor which shapes and influence international
trade and business along with global economy. Globalization which is a primary characteristic of
global economy has facilitated free flow of human resources from one country to another rich
influences global economic landscape.
Employees with expertise in specific fields travel to developed nations in search for
better lifestyle and improved lamination while organizations move there manufacturing plants
two developing economies in order to reduce costs by hiring cheap labour in such regions. This
showcases at human resources affect international business decision making and change the
global economic scenario by influencing the international investment in an developing economy
and Increasing labour market competition in developed economies.
An example of human resources affecting international trade can be seen by the
importance of human resources and workforce for international trade during the height of the
pandemic. The distinctions imposed by governments in various countries related to on site
working and presence of human resources had a significant impact on timely functioning of
supply chain as many manufacturing companies had to close their placements operations and so
for losses during the pandemic (Ganne, 2018). The international supply chain and trade was
affected by human resource restrictions as many businesses are not able to effectively function
on an international scale because of working restrictions of the pandemic.
Legislative Policies implemented by individual nations regarding the business of foreign
organizations dictate the investment meet by foreign companies in the specific country which has
an impact on international trade as well as the global economic environment. An example of
region specific legislative policies affecting international trade is Brexit. The implementation of
Brexit deal led to United Kingdom leaving the European Union which affected UK based
5

businesses along with European organizations expand it to the United Kingdom. The dynamics
of global business and business supply chain across United Kingdom and countries of European
Union were affected by the implementation of Brexit deal. This acts as a clear example of
legislation impacting international business and changing the international business environment
forever.
Technological advancements and availability of technology to businesses and common
public plays an important role in the global economy along with international trade.
Technological advancements which support businesses in making improvement across the globe
along with innovations which disrupt industries on international scale change the global
economic landscape (Gruszczynski, 2020). In addition to this availability of a technological
device too common individuals due to reduced costs changes business practices on a global scale
and effects globalization end global economy. Technological causes immense transformation in
the way companies and nations organize production trade goods invest capital and develop new
products and processes.
This significantly impacts the global economy as it changes the process of producing
goods and services and affects the requirement of other resources such as human resources and
natural resources for international trade and business. Automatization of production activities
due to technological advancement in the recent years is a primary example of technology
affecting the global business environment. The availability of sophisticated automation
technology along with artificial intelligence to businesses which can actually replacement for
human liver in many business activities has changed the global economy. This is because the
presence of sophisticated automated technology empowers businesses and reduces the need for
moving to developing economies in order to reduce labor costs as dependency on labor is
reduced by replacing them with sophisticated automated technology.
The global business environment refers to the environment in which different nations
with elements external to the regional environment of the company influence decision making
related to the usage of resources and capabilities. Another repetition of global business
environment states that the global business environment includes the overarching international
environment in which a company operates (Howse, 2021). The global business environment is
characterized by different factors such as political economic social technological legal and
environmental.
6

The rise of globalization has led to creation of many multinational businesses which are
present in different countries and the global business environment affects their profitability and
potential to success. In addition this small businesses now also have the opportunity to expand to
international regions and based their decision making on the global business environment to
succeed on a global scale in different foreign markets.
Global business environment facilitates growth of international trade and commerce in
different ways. Political stability In different nations and the formation of trade blocs by
government across the globe promotes free trade which is one of the main factors propelling
international trade (Khorana and García, 2018). The Global economic environment and the
economic growth of developing regions caused by globalization plays an important role in
increasing consumer confidence in different countries and changing the international trade
positively This is because due to globalization many organizations across the globe seek
expansion opportunities in developing countries which have growing economies and a large
consumer base.
Changes in social trends across the globe and the social acceptance of foreign companies
in different countries supports the growth of international trades as the consumers can we easily
persuaded into by choosing products off multinational foreign organizations. This prompts
international businesses to expand in different countries and exploit opportunity provided by
social acceptance of foreign organizations in different countries. The technological changes on
international scale such as availability of digital technology to common public in both
developing and developed economies changes to business environment and positively impacts
growth of international trade.
Digital technology and information and communication technology becoming common
across the globe has accelerated globalization and helped small as well as large companies in
expanding to new countries end attracting new consumer base (Mena, Karatzas and Hansen,
2022). This showcases how the technological factor of the global business environment supports
and develops international trade for small and medium sized organizations along with large
corporates. Climate change and demand for sustainability is an environmental factor of the
global business environment which has changed business practices and also created opportunities
for international trade.
7

Consumers are looking for products and services which support responsible shopping and
cause the least damage to the environment riches clear dude opportunities for sustainable
business organizations to expand their innovative and sustainable ideas on a global scale. In this
way Justin ability promotes international trade it makes the global business environment more
hospitable for small sustainable organizations. The legislative element of the global business
environment is one of the primary elements which supports international trade and business
directly (Mishra and et. al., 2021). This is because foreign business policies of government have
you direct effect on the ease of doing business in a specific country and countries with legislation
which supports international business in quickly expanding invites international trade and
disadvantages to global business activities.
8

CONCLUSION
From the above report it is determined that the global economy is affected by various factors
including human resources law technology natural resources and physical capital which shapes
the dynamics of international trade and effects the growth or fall in the global economic stability.
The global business environment consists of various factors which play an important role in
promoting international trade and business such as legislation is implemented by love meant
sand they reliability of the quested technology to businesses and common public.
9

REFRENCES
Books and Journals
Ahmedov, I., 2020. The Impact Of Digital Economy On International Trade. European Journal
of Business and Management Research, 5(4).
Ahn, J., 2020. A theory of domestic and international trade finance. Emerald Publishing Limited.
Akman, E., Karaman, A. S. and Kuzey, C., 2020. Visa trial of international trade: evidence from
support vector machines and neural networks. Journal of Management Analytics, 7(2). pp.231-
252.
Akoto, W., 2021. International trade and cyber conflict: Decomposing the effect of trade on
state-sponsored cyber attacks. Journal of Peace Research, p.0022343320964549.
Andelekke, J. and Gichuru, M., 2021. Review International Trade Includes Business Strategy
and the Role of International Organizations. Journal Dimensie Management and Public
Sector, 2(2). pp.1-8.
Blonigen, B. A. and Wilson, W. W. eds., 2018. Handbook of International Trade and
Transportation. Edward Elgar Publishing.
Ganne, E., 2018. Can Blockchain revolutionize international trade?. Geneva: World Trade
Organization.
Gruszczynski, L., 2020. The COVID-19 pandemic and international trade: Temporary turbulence
or paradigm shift?. European Journal of Risk Regulation, 11(2). pp.337-342.
Howse, R. L., 2021. Official Business: International Trade Law and the Resurgence (or
Resilience) of the State as an Economic Actor. University of Pennsylvania Journal of
International Law, Forthcoming.
Khorana, S. and García, M. eds., 2018. Handbook on the EU and international trade. Edward
Elgar Publishing.
Mena, C., Karatzas, A. and Hansen, C., 2022. International trade resilience and the Covid-19
pandemic. Journal of Business Research, 138. pp.77-91.
Mishra and et. al., 2021. Advances in innovation, trade and business: evidence from emerging
economies. Springer Nature.
10